Q4 2023 The AZEK Company Inc Earnings Call

Welcome back to the <unk> company's fourth quarter fiscal 'twenty to 'twenty three earnings call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. Please be advised that today's conference is being recorded I'd now like to hand.

Speaker 1: Welcome to the Ezekse Company's fourth quarter fiscal 2023 earnings call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Eric Robertson. Please go ahead, Eric.

The conference over to Eric Robertson. Please go ahead Eric.

Thank you and good afternoon, everyone. We issued our earnings press release and a supplemental earnings presentation. This afternoon to the Investor Relations portion of our website at investors that as a co dot com.

Speaker 2: We issued our earnings press release and a supplemental earnings presentation this afternoon to the Investor Relations portion of our website at investors.azicco. .

Speaker 2: The earnings press release would also be finished by an 8K on the SEC's website.

The earnings press release was also furnished via 8-K on the Sec's website.

Speaker 2: I am joined today by Jesse Singh, our Chief Executive Officer, and Peter Clifford, our Chief Operating Officer, and Chief Financial Officer.

I am joined today by Jessie Singh, our Chief Executive Officer, and Peter Clifford, Our Chief operating Officer, and Chief Financial Officer.

Speaker 2: I would like to remind everyone that during this call, we may make certain statements that constitute forward looking statements within the meeting of the federal security laws, including remarks about future expectations, beliefs, estimates, forecasts, plans, and prospects.

I would like to remind everyone that during this call. We may make certain statements that constitute forward looking statements within the meaning of the federal securities laws, including remarks about future expectations beliefs estimates forecasts plans and prospects.

Speaker 2: Such statements are subject to a variety of risks and uncertainties, as described in our periodic reports filed with the Securities and Exchange Commission, that could cause actual results to differ materials.

Such statements are subject to a variety of risks and uncertainties as described in our periodic reports filed with the Securities and Exchange Commission that could cause actual results to differ materially.

Speaker 2: We do not undertake any duty to update such forward looking state.

We do not undertake any duty to update such forward looking statements. Additionally, during today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating our performance.

Speaker 2: Additionally, during today's call, we will discuss non- GAAP financial measures, which we believe can be useful in evaluating our performance.

Speaker 2: These non-get measures should not be considered in isolation or as a substitute for result prepared in accordance with gas.

These non-GAAP measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Speaker 2: Reconciliation of such non-GAT measures can be found in our earnings press release, which is posted on our website.

Reconciliations of such non-GAAP measures can be found in our earnings press release, which is posted on our website.

Speaker 2: Now, let me turn the call over to Azic CEO , Jessie Singh. Good afternoon.

Now, let me turn the call over to <unk> CEO Jesse thing.

Good afternoon, and thank you for joining us.

Speaker 3: The ASAC team once again delivered strong results as quarter, including a 27.6% net sales growth year a net profit margin of 11% and a record fourth quarter adjusted ebit of margin of 27.4%.

Jack team once again delivered strong results this quarter, including a 27, 6% net sales growth year over year.

Net profit margin of 11% and a record fourth quarter adjusted EBITDA margin of 27.4% are.

Speaker 3: Our residential business grew 37.6% in the fourth quarter, and approximately 5% year over year, delivering an eighth straight year of net sales growth.

Our residential business grew 37, 6% in the fourth quarter and approximately 5% year over year, delivering an eighth straight year of net sales growth.

Speaker 3: I'm very proud of how the AIDZAC team was able to navigate in an uncertain market and consistently deliver against our commitment.

I'm very proud of that team was able to navigate in an uncertain market and consistently deliver against our commitments.

Speaker 3: The team outperformed by driving above market revenue growth and by delivering against productivity initiatives, resulting in significant adjusted EBITDA margin expansion in the second half of the year.

The team outperformed by driving above market revenue growth and by delivering against productivity initiatives, resulting in significant adjusted EBITDA margin expansion in the second half of the year.

Speaker 3: our focus on cash conversion and capital allocation throughout the fiscal year, including working capital efficiencies and discipline capital expenditures, delivered strong free cash flow generation of 274 million and returned a 115 million to shareholders through share reports.

Our focus on cash conversion and capital allocation throughout the fiscal year, including working capital efficiency.

Disciplined capital expenditures deliver strong free cash flow generation.

$274 million and returned a $115 million to shareholders through share repurchases.

Speaker 3: ASEX sales performance was driven by continued double digit south-root road in our residential business overall and in each of our leading deck rail and accessories and exterior categories, which outperformed in an uncertain repair and remodel market.

Exact sales performance was driven by continued double digit sell through growth in our residential business overall and in each of our leading <unk> rail and accessories, and exteriors categories, which outperformed it in uncertain repair and remodel market.

Speaker 3: We saw growth in both our residential pro and our retail channels as we benefited from the execution of our images.

We saw growth in both our residential pro and our retail channels as we benefited from the execution of our niches.

Speaker 3: In addition to our shelf space games and core decking and trim growth, we saw great results from new products and planning in our exterior business and aluminum rail and outdoor living.

In addition to our shelf space gains and core decking and try and grow we saw great results from new product planning in our exteriors business and aluminum rail and outdoor living.

Our residential segment, 5% year over year net sales growth in fiscal year 2023 stacked on top of 12% growth in fiscal 2022, and 35% growth in fiscal 2021.

Speaker 3: Our residential segments 5% year over year net sales growth in fiscal year 2023. A stacked on top of 12% growth in fiscal 2022 and 35% growth in fiscal 2021.

Speaker 3: On a calendar year basis, we see similar results with the business growing 31% in calendar 2021, and 4% in calendar 2022, during the inventory unwind within our channel.

On a calendar year basis, we see similar results with the business growing 31% in calendar 2021, and 4% in calendar 2022 during the inventory unwind within our channel.

Speaker 3: We expect this growth to continue in this calendar year, assuming the midpoint of our December quarter end guidance for calendar 2023, we would expect our residential segment to grow approximately double digits year over year in calendar 2023.

We expect this growth to continue in this calendar year, assuming the midpoint of our December quarter and guidance for calendar 2023, we would expect our residential segment to grow approximately double digits year over year in calendar 2023.

Speaker 3: We believe that this highlight not only the resiliency of our sub-segment.

We believe that this highlights not only the resiliency of our sub segment.

Speaker 3: but also the specific and unique capability of the ASAC growth model.

But also the specific and unique capability of the HVAC growth model.

Speaker 3: Our fiscal fourth quarter margins improves significantly, and we delivered 750 basis points of adjusted gross margin to 45%. And 600 basis points of adjusted EBITDA margin expansion to 27.4%.

Our fiscal fourth quarter margins improved significantly and we delivered 750 basis points of adjusted gross margin of 45% and 600 basis points of adjusted EBITDA margin expansion to 27, 4% as we.

Speaker 3: As we realize the benefits of excellent execution by our operations team, developing on productivity initiatives and increased production levels while reinvesting in marketing and branding.

The benefits of the excellent execution by our operations team.

Productivity initiatives and increased production levels, while reinvesting in marketing and branding.

Speaker 3: Cash conversion and discipline capital expenditures continue to be a focus. And in the fourth quarter we generated free cash flow of 92 million, growing 83 million year over year.

Cash conversion and disciplined capital expenditures continue to be a focus and then the fourth quarter, we generated free cash flow of $92 million growing $83 million year over year.

Speaker 3: Our strong free cash flow generation during the quarter supported approximately $61 million with the share of three percent.

Our strong free cash flow generation during the quarter supported approximately $61 million worth of share repurchases channel inventories had been conservatively positioned through our fiscal year end and we are proactively managing our finished goods inventory levels to maintain high levels of service.

Speaker 3: Channel inventories have been conservatively positioned through our fiscal year end, and we are proactively managing our finished goods inventory levels to maintain high levels of service. In addition, the business has operated with normalized operating in inventory cadence with lower lead times in our channel partners continuing to purchase as needed and managing inventory below historical average.

In addition.

<unk> has operated with normalized operating and inventory cadence with lower lead times, and our channel partners continuing to purchase as needed.

And managing inventory below historical averages.

Speaker 3: In October , we also announced the fail of our Vi-Com business, which closed earlier this month.

<unk>, we also announced the sale of our Viacom business, which closed earlier this month.

Speaker 3: Vi-Com is a great business and is a leader in industrial plastic sheet manufacturing.

<unk> is a great business and as a leader in industrial plastic sheet manufacturing.

Speaker 3: We believe that the transaction puts both businesses in a better position to achieve future success.

We believe that the transaction puts both businesses in a.

Better positioned to achieve future success.

Speaker 3: This strategic move simplifies our portfolio and further focuses ASAC on our strategic higher growth and margin opportunities in the repair and remodel and outdoor living markets associated with our residential segments.

This strategic move simplifies our portfolio and further focuses as act on our strategic higher growth and margin opportunities in the repair and remodel and outdoor living markets associated with our residential segment.

Speaker 3: As stated in our strategy, we also take a portfolio approach to revenue growth and margin expansion.

As stated in our strategy. We also take a portfolio approach to revenue growth and margin expansion.

During 2023, we successfully launched new products, including timber Tech advanced PBC landmark in boardwalk.

And timber tech composite reserves and reclaim Chester, along with railing options and an expansion of our exteriors portfolio.

We recently hosted hundreds of our contractor and dealer partners at our timber Tech Championship PGA Tour champions event, where we had the opportunity to engage in valuable discussions gather feedback and preview our new products for the 'twenty 'twenty four building season.

Among these product launches are the introduction of the new and improved timber tech composite train plus collection.

<unk> timber tech aluminum substructure framing.

Speaker 3: new timber tech railing horizontal cable infield.

New timber tech railing horizontal cable infill.

Speaker 3: and new ASEC Exterior's Bevel Fighting. We are expanding our position with the homeowner with better style, design, and performance and strengthening our already strong position with the Pro with an expanded offering of products that increase contractor labor, productivity, and efficiency.

And new HVAC exteriors babble siding.

We are expanding our position with the homeowner with better style design and performance and strengthening our already strong position with the pro with an expanded offering of products that increase contractor labor productivity and efficiencies.

Our partners are excited about the opportunity created by these new products.

Speaker 3: Our partners are excited about the opportunity created by these two brothers.

Speaker 3: During the year, we continue to make progress on our recycle initiatives and increase the amount of recycle content we use in our TimberTech Advanced PVC decking and our exterior's products.

During the year, we continued to make progress on our recycle initiatives and increase the amount of recycled content, we use in our timber tech advanced PVC decking and our exterior products.

Speaker 3: We also expanded the geographic reach of our high recycle content, paint pearl, pre-finished siding and trim solutions, and welcome lumbermans and wasa as new pre-finishing partners.

We also expanded the geographic reach of our high recycle content painful prefinished siding and trim solutions and welcome Lumberman's and Wausau as new pre finishing partners the.

Speaker 3: The expansion enables us to provide high quality pre-finished fighting and trim from the Northeast to Washington State. Overall, we are well positioned to capitalize on the momentum from both our shelf space games and brand awareness increases in 2023 as well as our slate of new products for 2024.

The expansion enables us to provide high quality pre finished siding and trim from the northeast to Washington State.

Overall, we are well positioned to capitalize on the momentum from both our shelf space gains.

Brand awareness increases in 2023, as well as our slate of new products for 2024.

We are also pleased to be recognized for several workplace awards this past quarter.

Speaker 3: We are also pleased to be recognized for several workplace awards this past quarter.

Speaker 3: For the first time, ASEC was named a 2024 best company to work for in the construction and materials category by US News and World Report, as well as a pop Chicago workplace for the third year in a row. One of our core values is the best team wins.

For the first time.

Zach was named a 2024 best company to work for in the construction and materials category by U S News and World report as well as a top Chicago workplace for the third year in a row.

One of our core values.

Is the best team wins.

Speaker 3: And we're pleased to be recognized for our commitments and actions towards this shared goal for their strengthening ASAX position as an employer of choice.

And we're pleased to be recognized for our commitments and actions towards this shared goal.

They are strengthening <unk> position as an employer of choice.

Speaker 3: As we look towards 2024, we are confident in our business strategy and our ability to deliver long-term above market growth and margin expansion.

As we look towards 2024, we are confident in our business strategy and our ability to deliver long term.

Above market growth and margin expansion.

Speaker 3: He did an olemetrics highlight continued elevated interest in our Timbertech brand. And we continue to see growing consumer engagement with website traffic leads and sample orders showing year over year growth during the fourth quarter. Outdoor living spaces have been ranked the number one most popular home exterior's remodel for the last 10 years according to the American Institute of Architects.

Digital metrics highlight continued elevated interest in our timber tech brand and we continue to see growing consumer engagement with website traffic.

Lead and sample order showing year over year growth.

In the fourth quarter outdoor living spaces had been ranked the number one most popular home exterior remodel for the last 10 years. According to the American Institute of architects.

Speaker 3: Our October quarterly pro contractor and dealer surveys indicate they remain busy and have a cautious outlook for growth in 2024.

Our October quarterly pro contractor in dealer surveys indicate they remain busy and have a cautious outlook for growth in 2024.

Speaker 3: Contractors continued to have back logs of approximately eight weeks overall. And anecdotally, some have indicated that their sales process is returning to a pre-pandemic normal.

Contractors continue to add backlogs of approximately eight weeks overall and anecdotally some have indicated that their sales process is returning to a pre pandemic normal.

Speaker 3: In addition to the stability of our existing contractors and dealers, we continue to expand our networks, allowing us to access more of the market and drive equal share and wood conversion. In fiscal 2023, we added over a thousand contractors in our Pro-Loyal Peak program, driven by continued education and awareness of the composite category and the Timbertech brand.

In addition to the stability of our existing contractors and dealers, we continue to expand our network.

Following us to access more of the market and drive share.

Sure and wood conversion.

In fiscal 2023, we added over 1000 contractors in our pro loyalty program driven by continued education and awareness of the composite category and the timber Tech brand.

Speaker 3: We continue to see positive residential style through growth and demand indicators, such as our customer surveys and digital metrics remain constructed as we begin the fiscal year 2024. While we continue to see favorable depend indicators, we acknowledge the continued macro economic uncertainty, mixed consumer confidence and the potential for a slower repair and remodel market.

We continue to see positive residential sell through growth and demand indicators, such as our customer surveys and digital metrics remain constructive as we began the fiscal year 2024.

While we continue to see favorable demand indicators, we acknowledged the continued macro economic uncertainty.

Mixed consumer confidence.

And the potential for a slower repair and remodel market.

Speaker 3: Our fiscal year, 2020, for planning assumptions, assume a flat to down repair model market and consistent with our historical track record, we would expect to outperform the market driven by ASAC-specific initiatives, including material conversion, channel expansion, new product innovations, and customer journey initiatives.

Our fiscal year 2020 for planning assumptions assume a flat to down repair and remodel market and consistent with our historical track record, we would expect to outperform the market driven by APAC specific initiatives, including material conversion channel expansion new product innovation.

<unk> and customer journey initiatives.

Speaker 3: We believe that our business model combined with our margin opportunities will provide us an opportunity to continue to grow sales and even for our residential business in fiscal 2024.

We believe that our business model combined with our margin opportunities will provide us an opportunity to continue to grow sales and EBITDA for our residential business in fiscal 2024.

Speaker 3: From the full fiscal year 2024, we expect that the sale of the Vi-Com business will reduce commercial segment sales by approximately $77 million, and adjusted EBITDA by approximately $17 million on an annualized basis.

For the full fiscal year 2024, we expect that the sale of the Viacom business will reduce commercial segment sales by approximately $77 million and adjusted EBITDA by approximately $17 million on an annualized basis.

Taking that adjustment into account.

Speaker 3: Taking that adjustment into account, AZAC expects consolidated net sales in the range of 1.335 billion to 1.395 billion and adjusted EBITDA in the range of 320 to 335 million.

<unk> expects consolidated net sales in the range of 133 5 billion to one 395 billion and adjusted EBITDA in the range of $320 million to $335 million.

Adjusting for the Viacom sale.

Speaker 3: adjusting for the Vi-Con fail. Our net sales guidance would imply three to eight percent year-over-year growth and 15 to 20 percent year-over-year adjusted even our growth.

Net sales guidance would imply 3% to 8% year over year growth.

15% to 20% year over year.

Justice EBITDA growth.

Speaker 3: Peter will provide more context on our guidance as we continue to see the opportunity to drive above market growth and margin expansion.

Peter will provide more context on our guidance as we continue to see the opportunity to drive above market growth and margin expansion.

Speaker 3: I will now turn the call over to Peter to provide some additional context on our financial results and outlook.

I will now turn the call over to Peter to provide some additional context on our financial results.

Outlook.

Speaker 4: Thanks, Chispey, and good afternoon, everyone. As they're highlighted at the beginning of the call, we have uploaded a supplemental earnings presentation on the investor relations portion of our website. Before we get into the fourth quarter in fiscal year 2023 results, I wanted to take a moment to reflect on the past year.

Thanks, Jessie and good afternoon, everyone as Erik highlighted at the beginning of the call. We have uploaded a supplemental earnings presentation on the Investor relations portion of our website.

Before we get into the fourth quarter and fiscal year 2023 results I wanted to take a moment to reflect on the past year.

Speaker 4: When we offered our planning assumptions back in November 2022, we were operating an uncertain environment at the time the market was digesting the unknown impact of the Fed's cumulative interest rate hikes, both the repair and model spend and consumer settlement. At the time of our guidance, we were getting questions around, wouldn't the material conversion continue in a down market? Would pricing hold in a deflationary environment?

When we offered our planning assumptions back in November 2022.

We're operating in an uncertain environment at the time the market was digesting the unknown impact of the feds cumulative interest rate hikes, both the repair and remodel spend and consumer sentiment at the time of our guidance, we were getting questions around wood material conversion continue in a down market with pricing hold in a deflationary.

Scenario environment what.

Speaker 4: Would we see the expected deflation in a slowdown? Could we manage our plants effectively for both an efficiency and capacity perspective to see if the upside of the market were better than expected? Could we manage our channel inventory conservatively and keep best in class service levels? Could we drive strong cash conversion to support a repurchase program to take advantage of dislocation?

Where do we see the expected deflation in a slowdown.

We manage our plants effectively for both an efficiency and capacity perspective sees the upside if the market were better than expected could.

Could we manage our channel inventory conservatively and keep best in class service levels could we drive strong cash conversion to support our repurchase program to take advantage of dislocations.

On all of these points the ASIC team was able to effectively manage the business and outperform expectations in fiscal 2023, our new product development and growth initiatives drove continued material conversion, we're able to sustain pricing in a more normalized commodity environment.

Speaker 4: We appropriately manage capacity and manufacturing costs and we're able to quickly react to stronger decking season by ramping production.

We appropriately manage capacity and manufacturing costs, and we're able to quickly react to a stronger second season by ramping production.

Speaker 4: while continuing to maintain industry leading service. And finally, our strong results in healthy cash generation, a lot of support, or share repurchase ambitions during the year.

While continuing to maintain industry, leading service and finally, our strong results and healthy cash generation allowed us to support our share repurchase ambitions during the year.

Speaker 4: To sum it all up, we set challenging targets at the outset of the fiscal year in a period of uncertainty. And we led the business to exceed those commits.

To sum it all up we said challenging targets at the outset of the fiscal year and a period of uncertainty and we led the business to exceed those commitments.

Speaker 4: And then when we talk about fiscal 2024, we once again encounter a similar economic backdrop. Despite this backdrop, we have confidence and credibility to deliver in fiscal 2024 based on the execution we demonstrated in fiscal 2023.

And then when we talk about fiscal 2024, we once again encountered a similar economic backdrop. Despite this backdrop, we have confidence and credibility to deliver in fiscal 2024 based upon the execution, we demonstrated in fiscal 2023.

Speaker 4: As Jesse mentioned up front, during the fourth quarter, we continue to see a positive demand environment in our residents.

Jesse mentioned upfront during the fourth quarter, we continued to see a positive demand environment in our residential business.

Speaker 4: South have remained equally strong through the season and contractor backlogs have been stable for the last four quarters at approximately eight weeks. At the same time, our digital KPIs remain strong.

Sell through remained equally strong through this season and contractor backlogs have been stable for the last four quarters at approximately eight weeks at the same time.

Our digital Kpis remained strong.

Speaker 4: And we used our positive shelter and results to continue to accelerate investment and brand awareness in both the quarter and the year. We believe we are already reaping the benefits of these brand investments.

And we used our positive soccer and results to continue to accelerate investment and brand awareness in both the quarter and the year. We believe we are already reaping the benefits of these brand investments.

Speaker 4: From an operating perspective, our production returned to normalize levels in the fourth quarter. I'll be it up substantially, you're over here due to the laughing of a large fiscal 4Q22 channel inventory reduction.

From an operating perspective, our production returned to normalized levels in the fourth quarter, albeit up sustained substantially year over year due to the lapping of a large fiscal <unk> 'twenty two channel inventory reduction.

Speaker 4: We continue to maintain strong service levels during the quarter while executing against our own full year inventory reduction plan drawing down inventory year over year by 79 million.

We continue to maintain strong service levels during the quarter, while executing against our own the full year inventory reduction plan, drawing down inventory year over year by $79 million.

Speaker 4: On the commodities front, key raw materials have remained stable at meaningfully lower input costs supporting our material safety.

On the commodities front key raw materials have remained stable at meaningfully lower input costs supporting our material savings.

Speaker 4: combination of double-digit residential cell through growth, coupled with strong execution against our material savings, conversion cost, and recycling initiatives helped us achieve record adjusted EBITI margins during the fourth quarter.

The combination of double digit residential sell through growth coupled with strong execution against our materials savings conversion cost and recycling initiatives helped us achieve record adjusted EBITDA margins during the fourth quarter.

Speaker 4: For the fourth quarter fiscal 2023, we grew net sales by 28% year-to-388.8.

For the fourth quarter of fiscal 2023, we grew net sales by 28% year over year to $388 8 million.

Speaker 4: which was above our guidance expectations. The fourth core growth was driven by the strength and the residential segment, partially offset by declines in our commercial segment.

It was above our guidance expectations for fourth quarter growth was driven by the strength in the residential segment, partially offset by declines in our commercial segment.

Speaker 4: 4Q23 gross profit increased by $77.8 million, or 108% year-over-year, $249.79 million.

<unk> 23, gross profit increased by $77 8 million or 108% year over year to $149 7 million <unk>.

Speaker 4: 4Q adjusted gross profit increased by 60.6 million or 53% year-over-year to 174.8 million. Our adjusted gross profit margin percentage increased 750 base points year-over-year to finish at 45%.

<unk> adjusted gross profit increased by $66 million.

Or 53% year over year to $174 8 million, our adjusted gross profit margin percentage increased 750 basis points year over year will finish up 45%.

Speaker 4: The adjusted growth profit increase was driven primarily by material deflation, manufacturing productivity, execution against material cost productivity initiatives, and a one time utilities reimbursement of approximately two million.

The adjusted gross profit increase was driven primarily by material deflation manufacturing productivity X.

<unk> against the material cost productivity initiatives, and a onetime utilities reimbursement of approximately $2 million.

SG&A expenses increased by $17 5 million to $85 million the bulk of the year over year increase was driven by our continued commitment to make investments in marketing and brand awareness.

Speaker 4: SGNA expenses increased by $17.5 million to $85 million. The bulk of the year-over-year increase was driven by our continued commitment to make investments in marketing and brand awareness.

Speaker 4: Adjust the EBITDA for the fourth quarter increased by 41.3 million or up 63% year over year, 206.4 million. The adjusted EBITDA margin rate for the quarter increased 600 base points year over year, the 27.4%. on mieux.

Adjusted EBITDA for the fourth quarter increased by 41 3 million are up 63% year over year to $106 4 million.

The adjusted EBITDA margin rate for the quarter increased 600 basis points year over year to 27, 4%.

Speaker 4: The primary driver of the year over year change and adjusted EBITDA was the impact of material deflation, manufacturing productivity, execution against material cost productivity issues. And a one time utilities reimbursement of approximately two million, partially offset by continued investment in marketing and branding.

The primary driver of the year over year change in adjusted EBITDA was the impact of material deflation manufacturing productivity.

Execution against the material cost productivity initiatives, and a onetime utilities reimbursement of approximately $2 million, partially offset by continued investment in marketing and branding.

Speaker 4: Then income for the fourth quarter increased by 47.4 million to 42.6 million or 28 cents per share. Adjusted net income for the fourth quarter increased by 29 million to 53.5 million or adjusted deluded EPS of 36 cents per share. Now, turn to-

Net income for the fourth quarter increased by $47 4 million.

$42 6 million or <unk> 28 per share adjusted.

Net income for the fourth quarter increased by 29 million to $53 5 million or adjusted diluted EPS of <unk> 36 per share.

Now turning to our segment results.

Speaker 4: Residential segment, Nat Fales for the Court quarter was 350 million up 38% year-over-year.

Residential segment net sales for the fourth quarter was $350 million up 38% year over year.

Speaker 4: Within the residential segment, we saw positive growth in both deck rail accessories and exteriors while our structure smart, pertula business navigated some destocking during the year.

Within the residential segment, we saw positive growth in both deck rail accessories and exteriors, while our structure smart pergola business navigated some destocking during the year.

Speaker 4: Residential segment adjusts the EBITDA for the fourth quarter, came in at $118 million, up approximately 83% year over year.

Residential segment adjusted EBITDA for the fourth quarter came in at $118 million up approximately 83% year over year.

Speaker 4: Residential segment adjusted even on margins were up 830 base points year over year to 33.7%

Residential segment adjusted EBITDA margins were up 830 basis points year over year to 33, 7%.

Commercial segment net sales for the quarter were $39 2 million down 22% year over year.

Speaker 4: Commercial segment net sales for the quarter were 39.2 million, down 22% year-over-year.

Speaker 4: These results are in line with our previous quarter's commentary and expectations.

These results were in line with our previous quarters commentary expectations within our commercial segment by found that sales came in at $17 5 million down approximately $8 6 million year over year.

Speaker 4: Within our commercial segment, why combat sales came in at 17.5 million, down approximately 8.6 million year over year. Commercial segment, a just a bit off for the quarter, came in at 9.2 million, a decrease of 5.3 million year over year.

Commercial segment adjusted EBITDA for the quarter came in at $9 2 million, a decrease of $5 3 million year over year.

Speaker 4: Within our commercial segment, Vycoma just said that I was 3.3 million.

Within our commercial segment Viacom adjusted EBITDA was $3 3 million. It is important to note. Despite a softer demand backdrop, we were able to hold our EBITDA margins for this segment at 23, 6% in the quarter.

Speaker 4: is important to note, despite a softer demand backdrop, we are able to hold our EBITDA margins for the segment at 23.6% in the quarter.

Speaker 4: From a balance sheet and cash flow perspective, we ended the quarter with cash and cash equivalent of 278 million and approximately 147 million available for future borrowings under our evolving credit facility.

From a balance sheet and cash flow perspective, we ended the quarter with cash and cash equivalents of $278 million and approximately 147 million available for future borrowings under our revolving credit facility.

Speaker 4: Working capital defined as inventory plus accounts receivable minus AP was 223 million down 118 million year over year. We ended the quarter with gross debt of 672 million, which included approximately 79 million of finance leases.

Working capital defined as inventory plus accounts receivable minus AP.

Was $223 million down a $118 million year over year.

We ended the quarter with gross debt of $672 million, which included approximately $79 million of finance leases.

Speaker 4: Net that was 394 million at our net leverage ratio, stood at 1.4 times at the end of the fourth quarter.

Net debt was $394 million and our net leverage ratio stood at one four times at the end of the fourth quarter.

Speaker 4: That cash from operating activities was 127 million during the fourth quarter, an increase of 87 million Euro.

Net cash from operating activities was $127 million during the fourth quarter, an increase of $87 million year over year.

Speaker 4: Capo expenditures for the quarter were approximately 35 million.

Capital expenditures for the quarter were approximately $35 million.

Speaker 4: for the four year fiscal 2023, free cash flow increased by $339 million year over year to $274 million.

For the full year fiscal 2023 free cash flow increased by $339 million year over year to $274 million.

As expected we were active during the quarter with our share repurchase program repurchasing approximately $61 million worth of shares.

Weighted average of $32 70 per share.

Given the strength of our cash position, we expect to be active again in the fiscal first quarter with our share repurchase activity.

Speaker 4: As a reminder, the remaining authorization under our share repurchase program is approximately 202 million.

As a reminder, the remaining authorization under our share repurchase program is approximately $202 million.

Our capital allocation priorities remain the same as we've previously communicated we will continue to invest in our business, both organically and inorganically and to the extent we.

We have excess cash flow, we will look to repurchase shares opportunistically.

As we turn to the outlook, let me provide some context and color on what were assuming for the upcoming fiscal year.

As a reminder, we announced the divestiture of our commercial segments Bicarb business in October 2023.

Starting in fiscal 2024 from a reporting perspective, we expect to combine all corporate expenses into the residential reporting segment.

We'll continue to report shrimp products within the commercial reporting segment.

Other words, the new residential segment adjusted EBITDA definition combines residential EBITDA plus corporate expenses. We believe this change in segment reporting will help investors more easily compare our residential business with fellow building products peers.

Speaker 4: We believe this change in segment reporting will help investors more easily compare our residential business with fellow building products peer.

Speaker 4: to assist with modeling by combat sales and adjusted even got ended the fiscal year 2023 at 77 million and 13 million respectively.

To assist with modeling by combat sales on adjusted EBITDA ended the fiscal year 2023 at $77 million and $13 million respectively.

Speaker 4: As a result of the divestiture, we will incur new expenses associated with an arms-length supply agreement between Vi-TOM and Scranton products to supply sheet with a total additional impact of approximately 4 million per year.

As a result of the divestiture, we will incur new expenses associated with an arm's length supply agreement between Viacom and shrimp.

Products to supply sheet with a total additional impact of approximately $4 million per year.

Speaker 4: Adjusted ev-dot for fiscal 2024, as a result of the transaction, will be impacted by approximately 17 million, which is reflected in our planning assumptions for fiscal 2024.

Adjusted EBITDA for fiscal 2024, as a result of the transaction will be impacted by approximately $17 million, which is reflected in our planning assumptions for fiscal 2024.

Speaker 4: As previously communicated, the ViCAM sale will result in cash taxes of approximately 21 to 23 million and an effective tax rate will approximately 53 to 56 percent and the first quarter due to the gain on the sale and a 32 to 33 percent effective tax rate for the full year.

As previously communicated the <unk> sale.

And cash taxes of approximately $21 million to $23 million and an effective tax rate of approximately 53% to 56%.

In the first quarter due to the gain on the sale of.

And a 32% to 33% effective tax rate for the full year.

Speaker 4: Normalized to exclude the gain on the cell from the Viacom transaction. The effective tax rate is approximately 27.

Normalized to exclude the gain on the sale from the Viacom transaction the effective tax rate is approximately 27%.

Speaker 4: I also wanted to revisit the previously communicated known carryover tailwinds that we have headed into fiscal 2024, adding to our confidence conviction heading into the year. As a reminder, about what we've discussed over the past few quarters, we experienced approximately 20 million of negative impact from underutilization the first half of fiscal 2023, which we expect not to reoccur in fiscal 2024.

I also wanted to revisit the previously communicated known carryover tailwind that we have headed into fiscal 2020 for adding to our confidence and conviction heading into the year.

As a reminder, about what we've discussed over the past few quarters, we experienced approximately $20 million of negative impact from Underutilization in the first half of fiscal 2023.

We expect not to reoccur in fiscal 2024.

Speaker 4: We also carry approximately 20 million in known deflation currently on our balance sheet, which will flow through the P&L in 2024.

We also carry approximately $20 million in known deflation currently on our balance sheet, which will flow through the P&L in 2024.

Speaker 4: The sale of iComp business modestly reduces some of the underutilization and deflation carry over tailwind by approximately 5 million and we will continue to expect to invest in marketing growth back to.

The sale of Viacom business modestly reduces some of the Underutilization and deflation carryover tailwind by approximately $5 million and we will continue to expect to invest in marketing and growth activities.

Speaker 4: Finally on the revenue side, recall that in prior year, 1Q23, we experienced approximately 30 to 35 million of that sales headwind from our channel inventory reductions, which we expect not to read in fiscal 2024.

Finally on the revenue side recall that in prior year <unk> 'twenty, three we experienced approximately $30 million to $35 million of that sales headwind from our channel inventory reductions, which we expect not to recur in fiscal 2024.

With that context, let me move to the planning assumptions for fiscal 2024.

Speaker 4: With that context, we'll move to the planning assumptions for fiscal 2024.

Speaker 4: We are assuming for the full year that repair model will be flat to down low single in 1 pin.

We are assuming for the full year that repair and remodel will be flat to down low single digits.

Speaker 4: For the items in our control, we are confident in our execution skills and ability to continue to drive above market growth.

For the items in our control we are confident in our execution skills and ability to continue to drive above market growth.

Speaker 4: We are carrying over ASAC specific initiative wins into 2024. We will lap the 1Q23 channel inventory reduction, which gives us confidence in our ability to grow our residential met sales by approximately 5% year over year in fiscal 2024 at the big point of our planning.

We are carrying over Asia specific initiative wins into 2024, we will lap the <unk> 'twenty three channel inventory reduction, which gives us confidence in our ability to grow our residential net sales by approximately 5% year over year in fiscal 2024 at the midpoint of our planning assumptions.

Speaker 4: The sum of these carryover impacts and growth assumptions drives our high-level planning assumptions for the year to 1.335 billion to 1.395 billion in revenue and 320 million to 335 million in adjusted even up.

Some of these carryover impacts and growth assumptions drives our high level planning assumptions for the year.

So 133 5 billion to $1 $3 95 billion in revenue and $320 million to $335 million and adjusted EBITDA.

Speaker 4: Adjusting for the VICOM sales, a net sales guidance range would imply 3 to 8% year-rear growth and 15 to 20% year-over-year growth and adjust the EBITDA.

Adjusting for the Viacom sales, our net sales guidance range would imply 3% to 8% year over year growth and 15% to 20% year over year growth.

Adjusted EBITDA for <unk>.

Speaker 4: A residential segment planning assumptions for the year.

Residential segment planning assumptions for the year.

Speaker 4: is 1.262 billion to 1.318 billion in that sales.

As one.

262 billion to $131 8 billion and net sales.

Speaker 4: and 306 million to 319 million and segmented justice at EBITDA. Representing three to eight percent sales growth year in 18 to 23 percent segment adjusted at EBITDA growth link abiding corporate expenses with a residential reporting segment as mentioned earlier. A few other assumptions this year.

$306 million to 319 million and segment adjusted EBITDA, representing 3% to 8% sales growth year over year, and 18% to 23% segment adjusted EBITDA growth when combining corporate expenses with our residential reporting segment as mentioned earlier.

A few other assumptions this year include the following.

Speaker 4: We expect strong growth margin performance, enabling us to continue to invest in growth-oriented marketing and brand awareness in initiatives. We're expecting capital expenditures in the range of 70 million to 95 million, consistent with our publicly stated target of cat-packs of approximately five to seven percent of revenue.

We expect strong gross margin performance, enabling us to continue to invest in growth oriented marketing and brand awareness initiatives.

<unk> capital expenditures in the range of 70 million to $95 million consistent with our publicly stated target of capex of approximately 5% to 7% of revenue.

We're expecting depreciation of approximately 87 million to $90 million.

Speaker 4: We are expecting depreciation of approximately 87 million to 90 million.

Speaker 4: We are targeting working capital reduction of approximately 10 to 20 million for the year.

We are targeting working capital reduction of approximately $10 million to $20 million for the year.

Speaker 4: And finally, as detailed earlier, we're expecting a gap patch rate for the full year of 32 to 33%.

And finally as detailed earlier, we're expecting a GAAP tax rate for the full year of 32% to 33%.

Speaker 4: For additional planning assumptions to assist with modeling fiscal 24, please refer to Supple 9 Learning's presentation we had posted on our investor relations website.

For additional planning assumptions to assist with modeling fiscal 'twenty four please refer to the supplemental earnings presentation, we have posted on our Investor Relations website.

Before we turn to our guide on the first quarter I wanted to provide context for the operating environment, we expect in fiscal <unk> 24.

Speaker 4: Before we turn to our guide on the first quarter, I wanted to provide context for the operating environment we expect in fiscal 1Q24.

Speaker 4: Through the quarter, we are expecting self-through growth and the mid to high single digit range.

For the quarter were expecting sell through growth in the mid to high single digit range.

Speaker 4: which as we know is a seasonally smaller quarter as much of the country winds down the building season. From an inventory staging perspective.

Which as we know is a seasonally smaller quarter as much of the country winds down the building season for.

From an inventory staging perspective.

Speaker 4: I would expect the channel to remain conservative in line with last year's behaves.

Expect the channel to remain conservative in line with last year's behavior.

Speaker 4: As a reminder, this is the period of the year in which the industry negotiates shelf space positions and stages inventory in the channel ahead of the upcoming buildings these.

As a reminder.

This is the period of the year and whats the industry negotiates shelf space positions in stages inventory in the channel ahead of the upcoming building season.

Speaker 4: A'sack historically ships the majority of our channel inventory built, otherwise known as early by in our second fiscal quarter. We are assuming that effectively all of this volume will ship in fiscal 2Q.

<unk> historically shipped the majority of our channel inventory build otherwise known as early buy.

In our second fiscal quarter, we are assuming that effectively all of this volume will ship in fiscal <unk>.

Speaker 4: Channel inventories were positioned conservatively at this glue year end and we are proactively managing our own finished goods inventory levels to maintain high levels of service.

<unk> inventories were positioned conservatively at fiscal year end, and we are proactively managing our own finished goods inventory levels to maintain high levels of service.

Speaker 4: As a reminder, we are lapping a fiscal 1Q23 channel inventory reduction of approximately 30 to 35 million.

As a reminder, we are lapping a fiscal <unk> 'twenty three channel inventory reduction of approximately $30 million to $35 million.

Speaker 4: From a margin perspective, we expect to have approximately 20 million of carryover benefits, including approximately 10 million from blapping the prior years under utilization and 10 million of deflation in the first quarter.

From a margin perspective, we expect to have approximately $20 million carryover benefits, including approximately $10 million from lapping prior year's laundry utilization and $10 million of deflation in the first quarter.

Speaker 4: Taking these factors into consideration, our guidance for the quarter is 230 million to 236 million of revenue and 45 million to 48 million in adjusted the dot. Adjusting for the buy-com sale, our net sales guidance range would employ 17 to 20% year-rear growth and 33 million to 36 million year-rear growth and adjusted the dot.

Taking these factors into consideration our guidance for the quarter is $230 million to $236 million of revenue and 45 million to $48 million and adjusted EBITDA adjust.

Adjusting for the Viacom sales, our net sales guidance range would imply 17% to 20% year over year growth and 33 million to $36 million year over year growth in adjusted EBITDA.

Speaker 4: We're expecting an effective tax rate for approximately 53 to 56% for the quarter, which again is higher as a result of the gain on the sale of eye compass.

We are expecting an effective tax rate of approximately 53% to 56% for the quarter, which again is higher as a result of the gain on the sale of Viacom business.

Speaker 4: Our team is excited, engaged, and well prepared, tackling the environment in front of us in fiscal 2024. With that, I'll now turn the call back to Jesse for some closing remarks. Thank you.

Our team is excited and engaged and well prepared to tackle the environment in front of us in fiscal 2024.

With that I'll now turn the call back to Jesse for some closing remarks.

Thanks Pete.

Speaker 3: I would again like to thank our dedicated team members, panel and supplier partners, and contractors that support the ASAC company.

I would again like to thank our dedicated team members channel and supplier partners and contractors that support the as that company.

Thank you for your contribution and a strong finish to the fiscal year.

Speaker 3: Thank you for your contribution and a strong finish to the fiscal year.

We remain incredibly excited about the long term material conversion opportunity ahead of us in the large and fast growing outdoor living and home exteriors market that as that plays in.

Speaker 3: We remain incredibly excited about the long-term material conversion opportunity ahead of us in the large and fast growing outdoor living and home experience markets that ASAC plays.

Speaker 3: Our residential segment has continued to show remarkable resiliency and growth capability. The business has delivered a compounded annual growth rate of 11.6% over the last 10 years, and 17.7% over the last five years.

Our residential segment has continued to show remarkable resiliency.

And growth capability.

The business has delivered a compounded annual growth rate of 11, 6% over the last 10 years and 17, 7% over the last five years.

Speaker 3: Our fiscal year 2023 results reflect the strength of our industry leading position, our focus on strategic growth initiative.

Our fiscal year 2023 results reflect the strength of our industry leading position.

Our focus on strategic growth initiatives.

Speaker 3: the resiliency of our markets and the significant margin expansion opportunities ahead of us.

The resiliency of our markets and the significant margin expansion opportunities ahead of us.

Speaker 3: Our strong free cash flow generation puts us in a great position from a capital allocation perspective to invest in growth opportunities and opportunistically participate and share we purchase.

Our strong free cash flow generation puts us in a great position from a capital allocation perspective to invest in growth opportunities.

And opportunistically participate in share repurchases.

Speaker 3: Our team's focus on operational excellence to drive above market growth and margin expansion across any market condition puts us in a position of strength as we begin fiscal year 2024.

Our team's focus on operational excellence to drive above market growth and margin expansion across any market condition puts us in a position of strength.

We began fiscal year 2024.

Speaker 3: Would that operator please open the line for questions?

With that operator, please open the line for questions.

He would like to ask a question. Please press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Crestar. One we ask that you limit yourself to one question and one follow up.

Speaker 1: If you would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. We ask that you limit yourself to one question and one follow.

Speaker 1: Your first question comes from the line of camp loss from Baird. Please go ahead. Yeah, hey, guys.

Your first question comes from the line of Tim <unk> from Baird. Please go ahead.

Yeah, Hey, guys. Good good afternoon Michele.

Yeah.

Maybe just kind of starting on the sales guide.

Speaker 5: Maybe just kind of starting on the sales guy. So I guess at the midpoint, you're guiding about 5% to 6% residential growth.

So I guess at the midpoint, you're guiding about 5% to 6% residential growth.

Speaker 5: in an art and art market that's maybe down 1, 2%. So 7% out growth. Maybe just talk about the big pieces of that and what's internal, what do you kind of have visibility to? And if there is outperformance in your eyes in fiscal 24, does it really come from internal initiatives or is it really gonna be a better move?

And Ah.

R&R market, it's maybe down one 2%, so 7% to 8% outgrowth maybe.

Maybe you can just talk about the big pieces of that and kind of what what's internal.

What do you kind of have visibility to.

And if there is outperformance in your eyes in fiscal 'twenty four it has it really come from internal initiatives or is it really going to be a better market at this point.

Yes, Tim this is Peter.

Speaker 4: Yes, and this is Peter. Yeah, the geography of the 7% there, about two points of that is the inventory lap, and then the other 5% is really our initiatives, and I would say right now, a little more than maybe half of that is carryover from commercial initiatives and shelf space wins from last year at Bolt Pro.

The geography of the 7% there about two points of that is the inventory lap and then the other 5% is really our initiatives.

Say right now.

Morton maybe half of that is carryover from commercial initiatives in shelf space wins from last year at both pro and retail.

Speaker 5: Okay, good. And then just on shelf space, I mean, was there anything, I guess, unique in fiscal 23 on some of the shelf space gains? Just double digits, you know, kind of self-regral through I think it's faster than what some of your peers are reporting. I'm just kind of wondering if there's anything in there that's kind of chunky or is it really just, you know, representative of something?

Okay. Okay. Okay, and then just on shelf space I mean was there anything I guess unique in fiscal 'twenty three on some of the shelf space gains just double digit kind of sell through growth was I think it's faster than what some of your peers are reporting I'm just kind of wondering if theres anything in there that's kind of chunky or is it really just representative of some of the investments you guys are made.

King.

Speaker 5: I, excuse me, by the way, I apologize for my voice. Apparently I've been talking to customers a bit too much here. So, you know, relative to your question, most of the pickups we've had, or, you know, expansions that you talk about, we're pretty normalized volume feathering in.

Excuse me by the way.

I apologize for my voice, apparently have been talking to customers.

Too much so.

Yes.

Relative to.

Your question most of the pick ups, we've had or expansions that you talk about.

We're pretty normalized volume feathering in.

Speaker 5: And so, you know, as Pete pointed out, you should think of it as as we expand our position.

And so.

As Pete pointed out you should think of it as as as we expand our position.

Speaker 5: You know, there's not a huge amount of cell in. A lot of it is just incrementally being added to a position which then yields benefit.

There's not a huge amount of sell in a lot of it is just incrementally being.

Being added to a position, which then yields benefits.

Speaker 5: you know, month to month and obviously we added it, you know, in some cases, beginning of last year, in some cases in the middle of last year. So you start to see the benefit as we move forward. And just as you highlighted, you know, we saw double digit cell through growth in both of our core channels, both retail and in the pro channel.time.

Month to month, and obviously, we added it.

Some cases at the beginning of last year in some cases in the middle of last year. So you'll start to see the benefit is.

As as we move forward and just as you highlighted.

We saw double digit sell through growth.

And both of our core channels, both retail and in the pro channel.

Very good good luck on the you guys. Thanks.

Your next question comes from the line of Keith Hughes from Truest. Please go ahead.

Speaker 1: Your next question comes from the line of Keith Hughes from Truist. Please go ahead.

Yes. Thanks of building on that you talked about double digit sell through the quarter kind of mid single digits.

Speaker 6: Yeah, thanks. Building on that, you talked about double digit shelter in the quarter, kind of mid-single digits. And the first quarter, the first quarter is coming up. You just be questioning if it's something slow, or is it the function of comps, or if it's a conservative stance, you can just talk around what's happening in these periods.

In the fiscal first quarter fiscal first quarters coming up.

The question is is something slowed or is this a function of comps or taking a conservative stance. If you could just talk around what's what's happening in these periods.

Speaker 5: Yeah, there's a natural question of where we sit now, have we seen any kind of a slowdown from what we described in fourth quarter. And I would say things continue.

Yes.

There is a natural question of.

Where we sit now have we seen any kind of a slowdown.

From what we described in the fourth quarter and I would say things continue.

Speaker 5: as we've seen it in the last quarter, as we've moved into this quarter, we just think it's appropriate, given that December tends to be a light month to assume a more conservative average as we go through the end of this quarter. But in general, things have continued pretty consistently for the last six months, last six months with that double digit cell through growth.

As as we've seen it in the last quarter is as we moved into this quarter. We just think it's appropriate given that December tends to be a light month.

To assume a more conservative average as we go through the.

At the end of this quarter, but in general things have continued pretty consistently for the last six months last six months with that double digit sell through growth.

Speaker 5: If we do happen to see some incremental volume, I mean, we would probably use that as best we can to, you know, to manage inventory even more conservatively in the channel.

If we do happen to see some incremental volume I mean, we would we would probably use that as best we can.

To manage inventory, even more conservatively in the channel.

Speaker 6: Okay, and you're we're at the point that your customers or the familiar customers are just ordering to replace things are going up the doors, that's correct.

Okay, and you're at the point that your customers your distributor customers or this quarter and to replace them as we're going out the door is that correct.

Yes, yes.

One final question.

Speaker 6: One final question. In the reported quarter of any of that, have you seen or are you expecting any price or is the growth what is right to get all bought?

In the reported quarter in your guidance have you seen are you expecting any price or is the growth will describe these are all volume.

Speaker 4: You should think of prices kind of negligible for the year to be honestly positive, but again, negligible. You should think of prices kind of negligible for the year to be honest.

You should think prices kind of negligible for the year to be modestly positive, but again negligible.

Great. Thank you very much.

Thank you.

Your next question comes from the line of Matthew Bouley from Barclays. Please go ahead.

Speaker 1: Your next question comes from the line of Matthew Boulie from Barkley. Please go ahead.

Speaker 7: Hey, good afternoon everyone. Thanks for taking the questions. Sting on the same topic of sort of outperforming the end market growth next year.

Hey, good afternoon, everyone. Thanks for taking the questions.

Sticking on the same topic of <unk>.

Sort of outperforming the.

The end market growth next year.

Speaker 7: Did I hear you say that a lot of that out performance is actually just kind of the carryover of some of the wins that you built on last year?

Did I hear you say that a lot of that outperformance is actually just kind of the carryover of some of the wins that you've built on last year and so if thats. The case. So my question is.

Speaker 7: And so if that's the case, my question is

Speaker 7: Do you have line of sight that potential for new business wins, you know, additional new products as you kind of roll out through the year, things like that, things that are sort of reminiscent of your investor day where you spoke about that kind of annual, you know, internal drivers of above market growth. Is there room for additional, you know, beyond just that kind of carry over that?

Do you have line of sight, the potential for new business wins additional new products as you kind of roll out through the year things like that things that are sort of reminiscent of your investor day, where you spoke about that kind of annual.

Internal drivers of above market growth is there room for additional beyond just that kind of carryover that youre speaking to.

Yes.

Speaker 5: Yeah, I, you know, first on the point of carryover, as as Pete mentioned, we have a little bit of inventory, lapping carryover, pretty modest, and then we've got some additional carryover, we feel confident that the wind we've already secured will give us an opportunity. And then on top of that, we expect to continue to drive our initiatives. I think the way you should think of

First on the point of carryover as as Pete mentioned, we had a little bit of inventory.

Lapin carryover.

Pretty modest and then we've got some additional carryover.

We feel confident that the wins we've already secured.

We will give us an opportunity and then on top of that we expect to continue to drive our initiatives.

The way you should think of.

Speaker 5: you know, our focus on driving above market growth is, you know, we're not trying to land the plane at a specific number or a specific percentage. I think our intent is to always continue to drive over performance.

Our focus on driving above market growth is we're not trying to land the plane at a specific number or a specific percentage I think our intent is to always continue to drive over performance. In this particular case, we're giving you a.

Speaker 5: And in this particular case, we're giving you a range that we feel comfortable that we're able to achieve given an uncertain market and given the execution that we already see ahead of us. We're going to constantly focus on expanding our portfolio. We announced a number of new products.

A range that we feel comfortable that we're able to achieve.

To achieve.

Given an uncertain market and given the execution that we already see ahead of us.

Going to constantly.

Focus on expanding our portfolio, we announced a number of new products and and many of those allow us to access some adjacencies and incremental positions and so.

Speaker 5: And many of those allow us to access some adjacencies and incremental positions. And so you should assume we're always striving for something bigger. We're just giving you what we think is an appropriate planning assumption as we move into next.

You should assume we're always striving for something bigger we're just giving you.

What we think is an appropriate planning assumption as we move into next year.

Speaker 7: Got it, thanks for that, Jesse. Um, second one, uh, just thinking about recycling and the progress there, again, going back to the investor day, you guys had outlined, um, you know, a potential material uplift to margins from mixing towards, uh, you know, greater usage of recycled materials. So my question is, where are you on that now?

Got it thanks for that Jesse.

Second one.

Just thinking about recycling and the progress there again going back to your Investor Day, you guys had outlined.

Potential material uplift to margins from mixing towards.

Greater usage of recycled materials. So my question is where are you on that now and kind of.

Speaker 7: Thinking about that EBITDA bridge for next year, what's implied in the guide around benefit from mixing torch or cycle materials?

Thinking about that EBITDA bridge for next year, what's implied in the guide around benefit from from mixing towards recycled materials.

Speaker 7: Yeah, Matt, this is Peter. You know, we're going back and actually updated here at the end of the quarter.

Yes, Matt this is Peter.

When we went back and actually updated here at the end of the quarter.

Speaker 8: The preview that we gave you guys in the investor day on back to 2009 through 2023 and it kind of said the same thing that ultimately, we've achieved about 50 base points, a kind of margin expansion each and every year throughout that period. That's what we would kind of expect as we lean forward. You know, the levers are still the same, right? We've got the opportunity to move to cheaper grades or recycle, just primarily a cap composite opportunity, increase recycled content, which is obviously the PVC deck and trim.

The preview that we gave you guys in the Investor Day and went back to 2009 through 2023 and it kind of said the same thing that ultimately we've achieved about 50 basis points of kind of margin expansion.

Each and every year throughout that period.

That's what we would kind of expect as we lean forward.

Levers are still the same right we've got the opportunity to move to cheaper grades of recycle just primarily capped composite opportunity.

Kris recycled content, which is obviously, the PVC deck and trim and as well across all three product categories. We have the opportunity to reduce our cost to convert those recycled materials down show.

Speaker 8: And as well, you know, across all three product categories, we have the opportunity to reduce our cost to convert those recycled materials down.

Speaker 8: We feel really good again about, you know, for us recycling is more iteration than it.

We feel really good again about for.

For us recycling is more iteration and innovation.

Speaker 5: And sorry, I think just to put a minor point on that, relative to what we said in the investor deck, you should think that we've added another 100 basis point.

And sorry, I think.

<unk> got to put a minor point on that.

Relative to what we said in the Investor deck, you should think that we've added another 100 basis points of benefit.

Speaker 5: of benefit, you know, 50 years as Pete pointed out. And as we look at our, you know, our margin opportunity, you know, as we demonstrated in our last quarter, you know, we certainly have a number of levers that we can pull and certainly recycling is one of them, but we'll continue to drive the other elements of productivity. Thank you very much.

<unk> 50, a year as Pete pointed out.

And as we look at R. R.

Our margin opportunity.

As as we've demonstrated in our last quarter.

We certainly have a number of levers that we can pull in.

Certainly recycling is one of them but.

But we will continue to drive the other elements of productivity.

Got it well thanks, Jesse Thanks, Pete Good luck guys.

Speaker 1: Your next question comes from the line of Philip Ng from Jeffries. Please go ahead.

Your next question comes from the line of Philip <unk> from Jefferies. Please go ahead.

Speaker 9: Hey guys, congrats on a strong quarter at the finish of the year. Pete, if I heard you correctly, your guidance for 2020 for your assuming 2% inventory lap and the rest is commercial initiative. So that seems pretty conservative. Your sellout sounds like fourth quarter is...

Hey, guys. Congrats on a strong quarter finished the year.

Pete if I heard you correctly your guidance for 2024, you're assuming 2% inventory lap in dresses commercial initiatives.

Seems pretty conservative your sell out and it sounds like fourth quarter is.

Speaker 9: and the mid-the-high single-digit. So implicitly in your four-year sales guide, what are you assuming for a sellout? And it sounds like it's assuming some moderation. Is that just a function of comps? Is there someone who wins that you had on new product? This year, this past.

In the mid to high single digit so implicitly in your full year sales guide what are you assuming for sell out and it sounds like it's assuming some moderation is that just a function of comps with some of the wins that you had on new products.

This year this past year.

Speaker 5: Yeah, I, you know, what I would say against the planning assumption is we're assuming

Yes.

What I would say.

Against the planning assumption is we're assuming.

Speaker 5: in our planning assumption that there is some potential for the market to be a bit slower than what we're seeing now.

In our planning assumption that there is some potential for market.

For the market to be a bit slower than what we're seeing now.

Speaker 5: And given the data in the macroeconomic environment, we think at this stage, it's appropriate to plan for a potential slowdown in R&R to become more negative. So the way you should just look at all of this is we're assuming a modestly less constructive market next year, and that's really how the numbers work.

And given the data and the macroeconomic environment. We think at this stage, it's appropriate to plan for a potential slowdown in R&R to become more negative.

So the way you should just look at all of this is we're assuming a <unk>.

Modestly less constructive market next year.

And that's really how the numbers work.

Speaker 9: On that note, Jesse, you've kind of managed the channel conservatively, right? I think the color you've given us all year was when you've done your survey, the channel is generally a little more upbeat. So I'm curious, when you've done your survey, what is your channel partner kind of expecting anticipating for growth in 2024? How are they kind of managing the early buy? Last year they were a little...

Okay.

On that note Jesse you kind of manage the channel conservatively red color, you've given us all year was when you've done your survey channels generally a little more upbeat. So I'm curious when you've done your survey.

Is your channel partners kind of expecting anticipating for growth.

In 2024.

How are they kind of managing the early buy last year they were a little.

Speaker 9: more conservative and they kind of bought more through the year like how are they kind of communicating their outlook for next year or for calendars? Well, I think it's 24. E.

A more conservative and they kind of bought more through the year like Howard are you kind of communicated.

Our outlook for next year.

For calendar 'twenty.

Sure.

Speaker 5: Yeah, obviously we're in the midst of conversations right now, but I think if you were to, you know, aggregate a wide variety of channel partners, I think what they would tell you is they, as they look out next year, they see a flatish year.

Yes.

Obviously, we're in the midst of conversations right now, but I think if you were to aggregate a wide variety of channel partners I think what they would tell you is they as they look out next year.

They see a flattish year.

Speaker 5: with the opportunity if we execute together in our categories to outgrow the flatish year.

With the opportunity if we execute together in our categories to outgrow the flattish year.

Speaker 5: in our product. So that's the macro view. Now, against that, we're working with them to make sure that they're being well-service.

And our products so that's the macro.

Our view now against that we're working with them to make sure that they.

They're being.

Well serviced.

Speaker 5: and that they're in a really good position. So I would think of this is a pretty normal year relative to how folks are gonna look at early buy.

And that they are in a really good position. So I would think of this as a pretty normal year relative to how folks are going to look at early buy.

And.

Last year, we're conservative.

I think we're sitting well on top of that I'm, not saying, we're going to be more aggressive I'm, not saying, they're going to be more conservative I think it'll be pretty consistent.

Pattern and it's really a matter of when they choose to buy in.

At what level, but I think in general the feedback from our channel is one of a flat with a potential positive in aggregate.

And a recognition that we have a unique ability to outgrow that.

Okay I appreciate the color thanks a lot.

Your next question comes from the line of Michael Rehaut from Jpmorgan. Please go ahead.

Speaker 1: Your next question comes from the line of Michael Reha from JP Morgan. Please go ahead.

Sure.

Speaker 10: Thanks for, good afternoon everyone. Thanks for taking my question.

Thanks, Good afternoon, everyone. Thanks for taking my question.

Speaker 10: I just wanted to first, you know, circle back a little bit to the first quarter. And if I heard right, you are expecting, you know, a little bit of inventory, conservatism in the channel against the cell through up.

Yes, I just wanted to first.

Circle back a little bit to the first quarter and if I heard right.

You are expecting.

A little bit of inventory.

Services and then the channel.

Against the sell through up.

Speaker 10: mid to high single digits on the residential side. So is that something that we should be expecting, I guess, in effect that to shift into the second quarter? And it sounds like you're kind of looking for felt through to the year to be.

Mid to high single digits on the residential side.

Is that something that we should be expecting.

I guess in effect, that's a shift into the second quarter.

And it sounds like you're kind of looking for sell through there for the year to be.

Speaker 10: You know, maybe a little bit more moderate as the year progresses relative to the first quarter. Is that, just wanna make sure understanding that correctly and they might have a better, you know, growth number in the second quarter, is that the right way to think about the cadence in the first half?

Maybe a little bit more moderate as the year progresses relative to the first quarter.

Is that just want to make sure we're understanding that correctly.

And you might have a better growth number in the second quarter or is that is that the right way to think about the cadence in the first half.

Speaker 5: You know, I would say Mike, it's probably too early to start to guide the second quarter. I think our intent has been in particular over the last, you know, six to 12 months to make sure.

I would say, Mike, it's probably too early to start to guide.

The second quarter I think our intent has been in particular over the last six to 12 months to make sure that we're doing a really good job of service. So that our channel can operate with an appropriate and and if necessary conservative inventory level.

Speaker 5: that we're doing a really good job of service so that our channel can operate within appropriate and if necessary conservative inventory level. You know, we're laughing at now as we had that at the end of the first quarter in 22. We expect channel to be in a good, but you know, flatish situation would last year and still able to support growth.

We're lapping that now as.

We add that at the end of the first quarter and 22, we expect channel to be in a in a good.

But flattish situation with last year.

And still able to support growth and then as we move through the quarters.

Speaker 5: And then as we move through the quarters, we'll see how volume progresses. And now, relative to cell-through assumption.

We'll see how.

Volume progresses.

Relative to sell through assumptions.

Speaker 5: You know, we've got pretty good visibility, obviously in the quarter that we sit. And we've got good, you know, directional visibility as we look at January and February , just given backlog.

We've got pretty good visibility, obviously in the quarter that we sit and we've got good directional visibility as we look at January and February just given backlogs.

Speaker 5: And so beyond that, everything is just the planning assumption. What you're trying to do is gauge the market and conservatively plan against what the market could do. So I think we're not in the prediction game right now of what's gonna happen in March, April , May, June of next year. What we just laying out is an appropriate planning assumption that we feel really good about our ability to deliver both on top and in particular, our EBITDA again.

And so beyond that everything is just the planning assumption, which you're trying to do is is.

Gauged the market and.

Conservatively plan against what the market can do so I think we're not in the prediction game right now of what's going to happen in March April May June of next year.

We're just laying out as an appropriate planning assumption that we feel really good about our ability to deliver both on top and in particular.

Our EBITDA against.

Speaker 10: I appreciate that, Jesse. I guess secondly, we kind of highlighted for your fiscal full year planning assumptions, continued investment in marketing and brand initiatives from a strong gross margin performance. I'm just thinking about longer term and I'm wondering about

Okay, No I appreciate that Jesse.

I guess secondly.

You kind of highlighted for your fiscal.

Full year planning assumption.

Continued investment in marketing and brand initiatives from a strong gross margin performance.

I'm, just thinking about longer term and you know.

I'm wondering about.

If the investment this year is something that you would consider a little bit above average as you continue to build out.

Speaker 10: You know, if the investment this year is something that, you know, you would consider a little bit above average as you can send you to build out, you know, the platform, you obviously over the last couple of years, we've made a couple of different acquisitions.

The platform you obviously over the last couple of years, we've made a couple of different acquisitions.

<unk> for example.

Speaker 10: burgles, for example, and the overall category continues to game shares well.

And in.

The overall category continues to gain share as well.

Speaker 10: would love to understand, you know, those investments and, you know, if you kind of think over the next two or three years, you might be able to get better leverage out of the S-GNA, you know, relative and, I think, ultimately, how to think about incrementally the DOM margins over time.

Would love to understand the those.

Those investments in.

If you kind of think over the next two or three years, you might be able to get better leverage out of the SG&A.

Relative and I think ultimately how to think about incremental EBITDA margins over time.

Speaker 5: Yeah, I would put it in a real simple way. I think this year we have an opportunity if we have the room to continue to invest in the business. So you're probably not, but our current assumption is that you're not gonna see leverage on S-G-N-A. If anything, it might contribute to 10, 20, 30 basis points. Honestly, I jobs in the business. It would cover a record of the equity company in $8 might have received www.play.com.au

Yes, I will put it in a real simple way I think this year, we have an opportunity.

If we have the room to continue to invest in the business. So you are probably not.

Our current assumption.

Is that youre not going to see leverage on SG&A.

If anything it might.

And might contribute to 10 2030 basis points of.

Speaker 5: of negative leverage. But I think as you move out beyond that, we make pretty substantial investments in our sales and marketing organization.

Of negative leverage, but I think as you move out beyond that.

A pretty substantial investments in our sales and marketing organization.

Speaker 5: We've seen a benefit from it. You should expect that it's really our choice, but I think as we move Through 24 into 25

We've seen a benefit from it you should expect that.

It's really our choice, but I think as we move through 'twenty four 'twenty five.

Speaker 5: We should start being in a position to get leverage off that. We certainly could get leverage this year if we chose to. It's really a lever that we'll decide how to pull, but right now that lever is more on an investment mode.

We should start being in a position to get leverage off that we certainly could get leverage this year, if we chose to.

It's really a lever that we will decide how to pull but right now that leverage is more in an investment mode.

Speaker 10: And so therefore, how should we think about incrementally the DOM margins over time for the REZY business?

And so therefore, how should we think about incremental EBITDA margins over time for the resi business.

I think once you move beyond this year and Pete Please chime in but I think what should move beyond this year and you should think of SG&A as being positive to leverage.

Speaker 5: I think once you move beyond this year and people, please chime in, but I think once you move beyond this year, you should think of SGNA as being positive to whatever.

Speaker 8: We said it won't happen every year, but most years looking forward past 24, we would expect possibly as much as 25 dips as a leverage opportunity.

Yes, we said it wont happen every year, but most years looking forward past 'twenty four we would expect possibly as much as 25 bps.

Leverage opportunity that's there.

Most years.

And look in the near term here part of the investment thesis is look we're continuing to clearly outperform.

Speaker 8: look in their term here, part of the investment thesis is look, we're continuing to clearly outperform the market as well as peers.

The market as well as peers so.

We want to keep that momentum.

Okay. Thank you.

Okay.

Speaker 1: Your next question comes from the line of John Lovato from UBS. Please go ahead.

Your next question comes from the line of John Novato from UBS. Please go ahead.

Good evening, guys and thanks for taking my questions.

Speaker 6: Thank you guys and thanks for taking my questions. The first one is Pete, you mentioned that in the fiscal year 24 outlook that pricing is going to be relatively flat to maybe a slight good guy. I mean, have your thoughts changed on the ability of the business to drive sort of low single-digit price increases over time? Is that more of kind of a...

First one is you mentioned that in the fiscal year 'twenty four outlook that pricing is going to be relatively flat to maybe a slight good guy we have your thoughts changed on the ability of the business to drive sort of low single digit price increases over time is that more of a kind of a 2025 story.

Speaker 11: And then, you know, similarly in the context of the brooch algorithm, how are you guys thinking about material? Could be...

And then some.

Really in the context of the <unk>.

Growth algorithm, how are you guys thinking about material conversion.

In 2024.

Speaker 8: Yeah, first on the pricing piece, look, we did some traditional product by product price increase.

Yes first on the pricing piece look we did sort of traditional product by product price increases here.

Speaker 8: uh... now that will be uh... you know basically upset by some program and programing costs on the gross and that's the kind of that again kind of a more modest negligible price for twenty four uh... look that's uh... a lot on the back drop of the price in that we've taken over the last two or three years we do expect in twenty twenty five that we return

Now it will be.

Basically offset by some program.

Programming costs on the gross to nets to kind of net to again kind of a more modest negligible price for 'twenty four.

Look that's a lot on the backdrop of the pricing that we've taken over the last two or three years. We do expect in 2025 that we've returned to a more traditional kind of annual pricing.

Pattern.

Speaker 8: As far as conversion, look, I think we feel really comfortable. Again, based upon the 23 performance, it was one of the questions that was open at the beginning of the years. Conversion still happened, does it still happen at the same pace? And it downcycled on our sector, clearly at a slow start. And the resolute answer was it does. And again, we wake up every morning, we know the lever is the pole for conversion. It's all about-

And as far as conversion look I think we feel really comfortable again based upon a 'twenty three performance. It was one of the questions that was open at the beginning of the year's conversion still happen does it still happen at the same pace.

Down cycle on our sector clearly had a slow start.

And.

The resolute answer was it does and again, we we wake up every morning, and we know the levers to pull for conversion.

Converting contractors, it's influencing architects to making sure we got the right new product launches that were fighting for shelf space. So people can see the product and in.

Speaker 8: and architects making sure we got the right new product launches that were fighting for shell space.

Speaker 8: and simply find an educating model.

Simplifying and educating the consumer in the journey.

Speaker 11: makes sense. Thank you. And then as a follow up, it sounds like demand in both the Pro Channel and the retail were both pretty good. Just curious on the mix side. If you've seen any kind of impact on, you know, mixed down, if you will, as the economy, maybe it's got a little bit more challenging and consumer cost.

Makes sense. Thank you and then as a follow up it sounds like demand in both the pro channel and retail were both pretty good just curious on the mix side, if you've seen any kind of impact on mixed down if you will as the economy, maybe it's gotten a little bit more challenging and consumer confidence has waned to some extent.

Speaker 8: Yeah, generally speaking, our products mix has been really stable. As we called out on the last two falls, we were under-penetrated in the good category, right, due to capacity constraints during the pandemic. As we've relaunched here, prime and prime plus, with ample capacity, we've obviously picked up some share this year in that good category.

Yes, generally speaking our products mix has been really stable as we've called out on the last two false.

We were underpenetrated in the good category right due to capacity constraints during the pandemic.

As we've relaunched your prime and prime plus with ample capacity.

Obviously picked up some share this.

This year in that good category.

Great I appreciate it thank you.

Speaker 5: John , John , I think one of the things just to continue to highlight is, you know, we are predominantly pro and, um,

John John I think one of the things just to continue to highlight is.

We are predominantly pro.

And we.

We tend to skew.

Speaker 5: more premium and I think as you see that

More premium and I think as you see that.

Speaker 5: You tend to see pretty strong resiliency there.

You tend to see pretty strong resiliency there.

Speaker 5: And we see it in all of our data, our good, our more premium products continue to do well.

And.

We see it in all of our data are good.

Our more premium products continued to do well.

Speaker 5: And then as Pete pointed out, we've been able to pick up, you know, semi-criminal share at the entry level. But I think in reality,

And then as Steve pointed out we've been able to pick up some incremental share at the entry level.

But I think in reality.

Speaker 5: you know, the more premium areas continue to be pretty stable and growing, which is what you might expect in an economy that...

The more premium areas continue to be pretty stable and growing which is what you might expect.

Now in an economy that.

Speaker 5: has a fair amount of wealth that, you know, that sits through, you know, equity holdings and home equity value.

It has a fair amount of wealth.

That that sit through equity holdings and home equity values.

Your next question comes from the line of Susan Mcclary from Goldman Sachs. Please go ahead.

Speaker 1: Your next question comes from the line of Susan McLeary from Goldman Sachs. Please go ahead. Thanks.

Thank you good evening everyone.

Speaker 1: The first question is, when we think about the range that you gave for sales growth next year of 3 to 8%, can you talk about the environment or the factors that would take you to the lower end versus the higher end of that range next year?

Just maybe question is when we think about the range that you gave for sales growth next year of 3% to 8% can you talk about the environment or the factors that would take you to the lower end versus the higher end of that range next year.

Yes, I mean ultimately it would have to be that R&R is at the lower end of kind of low to mid single digits negative.

Speaker 8: Yeah, I mean, ultimately it would have to be that that R&R is, you know, at the lower end of kind of...

Okay.

Right.

Then.

In the prepared remarks, when you were talking about some of the new products and initiatives for next year. It seemed like rail came up quite a bit maybe perhaps more than it has in the past can you talk about how youre thinking of the opportunity there and anything that we should be thinking about as we think about the next couple of years.

Yes.

Speaker 5: Yeah, Susan, I'll take that. We highlighted that we play in multiple markets and that we see good opportunity in all of them. Clearly, rail is a close-in part of...

And I'll take that.

Highlighted.

That we play in multiple markets and.

That we see good opportunity in all of them clearly rail is.

Close in part of.

Our business we bought.

Speaker 5: our business. We bought an aluminum rail company in the tail end of 2018. We bought another rail company last year, which is a super premium.

On aluminum rail company in at the tail end of 2018.

We bought another rail company last year, which is a super premium PD.

Speaker 5: a PDC rail company and we've seen really really nice growth

PVC rail company, and we've seen really really nice growth.

From those acquisitions, and we have reinvested and reinvented our core portfolio by both simplifying it but also upgrading it and so for US as we look at 2022.

Speaker 5: from those acquisitions and we have reinvested and reinvented our core portfolio by both simplifying it but also upgrading it. And so for us, as we look at 2022, we've had really, really nice rail growth that would be accretive to the growth that we've had overall in the company. And we would expect that to continue as, we're uniquely positioned.

Had really really nice rail growth that would be accretive.

The growth that we've had overall in the company and we would expect that to continue as we are uniquely positioned.

Speaker 5: with having an incredibly broad portfolio. And we would expect to continue to use that portfolio to expand our position on the market. Okay, thank you.

With add on an incredibly broad portfolio.

And we would expect to continue to use that portfolio to expand our position in the market.

Okay. Thank you good luck with everything.

I appreciate it thank you Susan.

Speaker 1: Your next question comes from the line of Mike Donald from RBC Capital Markets. Please go ahead.

Your next question comes from the line of Mike Dahl from RBC capital markets. Please go ahead.

Hi, Thanks for taking my questions.

Speaker 12: First one on the cost tailwinds. So I think P-U-R articulated that that 40 million and no endiflation in production tailwinds, maybe that comes down to 35.

First one on the cost tailwind.

Sure.

Pete.

Articulated that that $40 million of known deflation in production <unk>, maybe that comes down to 35.

Speaker 12: when you account for the buy-coms by Vesture. Can you just elaborate more on?

When you account for the Viacom divestiture can you just elaborate more on.

What youre seeing on the raw materials side, you talked about this being known deflation on the balance sheet.

Speaker 12: what you're seeing on the wrong material side and you talked about this being known deflation on the balance sheet. But is there potential for additional deflationary benefits if raw mats stay where they are today and you cycle into, you continue to cycle into that in your way?

There are potential for additional.

Deflationary benefits, if raw mats stay where they are today and you cycle into you continue to cycle into that and your width.

Speaker 8: Yeah, Mike, the view on the commodities front, from an expectation perspective of kind of what's embedded in the planning assumptions is looked at input costs of stabilized.

Yes, Mike the view on the commodities front from an expectation perspective of kind of what's embedded in the planning assumptions I just looked at input costs have stabilized and are expected to remain kind of relatively flat all year, although a few modest increases in the back half of the year. So it's kind of steady state.

Speaker 8: and are expected to remain kind of relatively flat all year.

Speaker 8: huge modest increases in the back half of the year. So it's kind of steady state is sort of the view from

Is sort of the view from sort of the industry.

Publications CDI.

Okay. So that that the $35 million total you think fully encompasses where we're at today.

Speaker 12: Okay, so that the 35 million total, you think fully encompasses where we're at.

Speaker 8: It does. And if you remember, commodities drop very sharply right after we started the year. So really they dropped fast and then they stabilized. And we've been kind of riding sideways here for the last couple of years.

And if you remember.

Commodities drop very sharply right. After we started the year.

So really they dropped fast and then they stabilized and.

We've been kind of right in sideways here for the last couple of six to eight months.

Okay.

Speaker 12: Okay, my second question. Okay, maybe I'm just interpreted this when the initial release came out, but I think when the buycoms I've asked you now, the idea was to roll up all of the reporting into the residential segment. Now you're putting corporate expenses into Rezzy, but keeping Scrant products separate and commercial, anything to read into that and whether you're in as changed on what to do with the remaining Scrant products business.

Second question.

Okay, maybe I misinterpreted this when the initial release came out but I think when the Viacom divestiture.

The idea was to roll up all of the reporting into the residential segment now youre, putting corporate expenses.

Rajiv, but keeping scranton products separate commercial.

Anything to read into that whether your chain.

Changed on what to do with the remaining SRAM products business.

Yes, I mean look I think it was socially away for us to make it easier for folks to compare us to our peers within the building products space that most folks.

Speaker 8: Yeah, I mean, look, I think it was self-sli-a-way for us to make it easier for folks to compare us to our peers within the building products base at most folks. The follow-ups are most interested in...

The follow ups are most interested in residential so it <unk>.

Logical too.

Put those two pieces together.

Got it okay. Thanks.

Your next question comes from the line of Ralph <unk> from Bank of America. Please go ahead.

Speaker 1: Your next question comes from the line of Rafe Jevrosik from Bank of America. Please go ahead.

Speaker 13: Great. Hi, Jay. Thanks for taking my questions. First, I want to just ask, can you talk about the cell out trends in decking versus exterior categories that you saw last quarter and then what are you assuming in your aloe preach?

Great Hi, Jay Thanks for taking my questions.

First of all I wanted to just ask can you talk about the sell out trends in decking versus exterior.

Your categories.

That you saw last quarter and then what are you assuming in your outlook for each of them.

Yes.

Speaker 5: Yeah, in a high level, both of them were roughly similar.

Yes.

High level.

<unk>.

Both of them were.

We're roughly.

Similar and positive.

Speaker 5: And I think as, you know, as we look out the next year, we're not parsing out, you know, any specific business, you know, as we've highlighted, we've got conversion opportunity and new products on Decrill and Accessory Side. And we've also got a number of new products.

And I think as.

As we look out to next year, we're not parsing out.

Any specific business as well.

We've highlighted we've got conversion opportunity.

New products on deck rail and accessory side and we've also got a number of new products.

That will help us drive wood conversion on the exterior side. So we've seen nice sell through growth in both of them.

Speaker 5: that will help us drive wood conversion on the exterior side. So we've seen nice, out to the growth in both.

Got it and then just.

Speaker 13: Got it. And then just following up with some of the earlier comments on that early buy. You mentioned that normally the majority of the other buys in the second quarter.

Just following up on some of the earlier comments on the early buy.

You mentioned that normally the majority of <unk> in the second quarter.

Speaker 13: But some of it has historically fell in the fiscal first quarter, but this year effectively it's all going to ship in the second quarter.

But some of it has historically fell in the first fiscal first quarter, but this year effectively it's all going to ship in the second quarter. What's is there a way you can quantify the rough impact of that assumption.

Speaker 13: What's the other way you can quantify the rough impact of that assumption?

And then what portion of your sales in a typical year would come in the early buy.

Speaker 13: And then what portion of your cells in a typical year would come in the early?

Yes.

Yes, I mean I'll take the first part of the question on sort of.

Speaker 8: Yeah, I mean, I'll take the first part of the question on sort of, you know, the catalyst for most of it moving to the second quarter now is, look, it used to happen in the first quarter because capacity was...

The catalyst for most of US moving into the second quarter now is look it used to happen in the first quarter because capacity it wasn't capable of supplying as much product as what was needed in the second quarter.

Obviously, what the capacity expansions in the last two years.

Again kind of the catalyst for why we really don't feel like Theres a need to have any.

Shipments in our fiscal <unk> and that virtually all of it will be in the second quarter.

And then relative to the percentage, we haven't talked about that.

Speaker 5: And then it relative to the percentage, we haven't talked about that. I think the most important part of this winter negotiation is that we position ourselves well with our customers to drive growth throughout the year.

I think the most important.

Part of this winter negotiation.

Is that we position ourselves well with our customers to drive growth throughout the year.

Speaker 5: So, you know, for us the most valuable part of this is the partnership discussion of how we're going to work together to grow our mutual businesses with our channel partners.

For us the most valuable part of this is the partnership discussion of how we're going to work together to grow our mutual businesses with our channel partners.

Speaker 5: And in that respect, you know, the quarter and the discussions are important to set up the year. What it does do is it gives us pretty good visibility on revenue within the quarter.

And in that respect the quarter and the discussions are important to set up the year. What it does do is it gives us pretty good visibility on revenue within the quarter and so as we've talked about in the past and our competitors have too.

Speaker 5: And so as we've talked about in the past and our competitors have to, you know, really the October quarter and the January quarter are really quarters that end one year and begin another and they're staging quarters.

Really the October quarter, and the January quarter or really quarters that.

And one year and begin to another and they are staging quarters.

Speaker 5: And then, we'll see the real impact in season as we move into our fiscal third quarter and fourth quarter.

And then we will see the real impact in season, as we move into <unk>.

Yeah.

Our fiscal.

Third quarter and fourth quarter.

Yeah.

Okay. Thank you that's helpful.

Your next question comes from the line of Trey Grooms from Stephens incorporated. Please go ahead.

Speaker 1: Your next question comes from the line of trade grooms from Stevens Inc. Please go ahead.

Speaker 14: Hey, good afternoon. This is Noem or Kausko on portray. Thanks for taking my questions. So maybe first I just-

Hey, Good afternoon. This is known accounts go on for Trey Thanks for taking my questions.

So maybe first I just wanted to follow up on.

Speaker 14: gross margins. It sounds like, you know, continuing to ramp production from here. You've highlighted the raw material deflation that'll help the front half of fiscal year 25 and the kind of roll up in the back half. So I guess.

Gross margins it sounds like continuing to ramp production from here you've highlighted the raw material.

<unk>.

Help the front half of fiscal year, 'twenty, five and the kind of roll off in the back half So I guess.

Speaker 14: you know, would you expect gross margins to be stronger in the front half and the moderate in the back half? Is that kind of the right way to think about it here or are there other items we should consider as we think about 24?

Would you would expect gross margins to be stronger than the front half and then moderate in the back half is that kind of the right way to think about it here or there other items, we should consider as we think about 'twenty four.

Speaker 8: And you know, obviously a year over a year, the performance and gross mark.

Obviously year over year the performance on gross margin is going to be meaningfully accretive in the first half of the year given what we're lapping and then.

Speaker 8: creative in the first half of the year, given what we're laughing and then, you know, I would assume or expect kind of consistency in the back half of the year.

I would assume or expect.

Consistency in the back half of the year with with this.

Second half of 'twenty three.

Speaker 14: Got it, that makes sense. And then on my follow up, you know, sounds like continuing to make investments in SGNA, which would prevent leverage in 24. But when you think about SGNA as a percent of sales, you know, it's 23, a pretty comparable year, or would you expect that number to move meaningfully higher?

Got it that makes sense.

And then on my follow up.

It sounds like.

Continuing to make investments in SG&A.

Would prevent leverage in 'twenty four but when you think about SG&A as a percent of sales.

It's 23 are pretty comparable year or would you expect that number to move meaningfully higher.

Speaker 8: We're not expecting significantly negative leverage. It'll be flat, modestly negative.

We're not expecting significantly negative leverage it'll be flat to modestly negative.

Jesse said, it's probably reasonable to think maybe 20 bps.

Speaker 14: Got it. That makes sense. Thanks for the time and good luck with the rest of your

Got it that makes sense thanks for the time.

Good luck with the rest of the year.

Speaker 5: Appreciate it. The last comment on that, that really depends on volume. And as we look at our ability to deliver even on margin, we feel really good that in any scenario, we can get into that 24 plus range. So we talked about that, put this on a path towards that 27 and a half that we talked about by 27. And so...

I appreciate it.

The last comment on that that really depends on volume.

And as we look at.

Our ability to deliver EBITDA margin, we feel really.

Good that in any scenario, we can get into that 'twenty four.

Plus range that we talked about that puts us on a path towards that 2007 and a half.

That we've talked about bi.

By 2007 and so.

Speaker 5: So with that, thank you all for joining. We feel, as you can tell, we're pretty pleased with how we ended the quarter. And we feel excited about what they had of us and look forward to chatting with the rest of you, offline as needed. Take care and thanks for joining us. Appreciate it.

So with that thank you all for joining we feel.

As you can tell we're pretty pleased with how we ended the quarter.

And.

Yes, we feel excited about what's ahead of us and look forward to.

<unk> with the rest of it offline as needed take care and thanks for joining us I appreciate it.

Speaker 1: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Please wait the conference will begin shortly.

Speaker 15: Please wait, the conference will begin shortly.

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